Dear Mr Frahm,
I am here in Berlin on my way to Paris, where I will stay only tomorrow.
At the initiative of Mr Mendrochowitz (who is in Vienna right now) I dare to ask you whether it would be convenient for you if I came by on my way back and visited you in Hamburg. Mr Mendrochowitz was of the opinion that the unsolved matter between us would be dealt with best by a meeting. I will be at the Grand Hotel Paris tomorrow until 1 p.m. and would be grateful for a telegram.
The following day, while he was in Paris, a telegram duly arrived from Blohm & Voss: ‘Nothing against a visit this week, next week not possible’.11 Whatever the outcome of this meeting, it seems clear that despite the impression he sought to create, namely that his approach was being made at Mendrochowitz’s instigation, Mendrochowitz had no idea he was doing anything of the kind. In ignorance of the meeting, Mendrochowitz wrote to Blohm & Voss on 23 April12 expressing some frustration at Reilly’s demands for a higher commission:
In this matter we inform you that with utmost respect that Mr Reilly does not want to accept the application made to him on the part of Mr Frahm. He asserts that the amount offered him is not even enough to satisfy his background men and otherwise considers the sum not nearly commensurate with his services. It will not be easy for us to reach agreement with this stubborn man. We request by all means a response from you, after which the matter will be further dealt with.
Reilly’s stock with Blohm & Voss was clearly somewhat higher than it was with Mendrochowitz, for on 26 April they sent a telegram agreeing to raise Reilly’s portion from 6,700 roubles to 10,000 roubles.13
On 27 April Blohm & Voss sent Mendrochowitz and Lubiensky a cheque for 27,500 roubles made payable to the firm’s bankers, Crédit Lyonnais, St Petersburg, and a statement14 setting out how the money should be dispersed:
For yourself: 15,000 roubles
For Mr Reilly: 10,000 roubles
For payments already made to Mr Reilly: 300 roubles
For Dr Polly: 1,000 roubles
For payments already made to Dr Polly: 1,000 roubles
For your typist: 200 roubles
The fact that Reilly had clearly been asking for more than 10,000 roubles is apparent from Mendrochowitz’ reply on 27 Apriclass="underline"
We confirm receipt of your dispatch in which you increase the portion in question by 3,300 roubles. We have not yet, however, informed the person in question because he continues to insist on the preposterous standpoint: ‘all or nothing at all’. Relenting immediately on your part would certainly at this point in time not serve its purpose and to the contrary strengthen the view of the person in question that he should succeed. It appears to be the case that he has a difficult standpoint, which is his own fault. In view of your very noble concessions, we hope to reach a result in the course of the next few days, about which we will inform you.15
When Mendrochowitz issued Blohm & Voss with a receipt16 he informed them:
We confirm with thanks the receipt of your valued letter from 27 of this month with the enclosed cheque for 27,500 roubles (twentyseven thousand five hundred roubles). With exception to the money intended for Mr Reilly we have used the amount according to your deployment. We are not yet finished with Mr Reilly and withhold the money at his disposal until he declares his agreement to the amount. He believes he is able to act in our interests in the course of the next few days by his friends getting the German boiler system accepted. We therefore want to wait a few days until the meeting in question takes place, and we hope then agreement is achieved. We thank you in the name of all involved for transmitting the amounts in question.
Mendrochowitz was clearly unwilling to give in to Reilly and his demands and was waiting to see if his behind-the-scenes work actually got the results in terms of the boiler order. Unfortunately, the file contains no more correspondence between Reilly and the firm of Mendrochowitz & Lubiensky on this or any other matter. This absence may, in itself, tell a story, namely that having already had a taste of Reilly’s business methods, the firm had no further associations with him from that time on. This episode also contrasts sharply with Robin Bruce Lockhart’s argument that Mendrochowitz offered Reilly a fifty-fifty partnership in the firm, and that Reilly was effectively running the firm in all but name by 1911.17 Lockhart further states that Reilly ousted Lubiensky as Mendrochowitz’ partner and replaced him with a banker named ‘Chubersky’,18 yet not a single reference to a Chubersky or Shubersky is to be found anywhere in the company’s records or indeed those of Blohm & Voss. On the contrary, they show Lubiensky playing a key role for many years to come.
Mendrochowitz’ chagrin is understandable because, if Reilly’s demands were met, his earnings from the transaction would be comparable with Mendrochowitz’ own. What, then, was Reilly actually doing for Blohm & Voss to warrant such rewards? Rapid industrialisation coupled with a massive naval rearmament programme created a heaven-sent opportunity, not only for Russian firms but also for those in Britain, France and Germany. Competition for contracts was little short of cut-throat and almost any means, fair or foul, were sanctioned to gain an advantage over a competitor.
Kurt Orbanowsky, a Blohm & Voss engineer who spent considerable time in St Petersburg negotiating with Russian officials about shipbuilding contracts, wrote several hundred pages of reports back to the company in Hamburg, which provide a most revealing insight into the role Reilly played.19 It would seem that Reilly’s main function was to oil the wheels of business, working primarily behind the scenes, something at which he had always excelled. As a master of intrigue and corruption in its many forms, Reilly was clearly someone whose services would be invaluable in the cutthroat market place that existed in pre-war St Petersburg.
Orbanowsky’s reports are peppered with references to Reilly, who clearly has a pipeline into the Ministry of Marine. On 28 April 1909,20 for example, Orbanowsky reported that ‘Reilly thinks he will know the day after tomorrow whether the Programme discussions will be postponed’. In another report a year later, it is again clear that Blohm & Voss were receiving inside information from Reilly via Orbanowsky:
…the gentlemen have not yet decided which type of ship they should choose. I will have the opportunity to talk about this with Reilly… it would be desirable if they chose to order a smaller number of ships of higher quality because we have the greatest experience in the building and profitability of this type of ship.21
The modus operandi for one such as Reilly would appear to be something along the lines of identifying potential opposition and spreading misinformation about them and their product. Through a web of political, court and ministerial contacts, listening posts could be established that would pick up news of new contracts, specifications, deadlines, budgets and costings. Of course, this network would need to be supplied with suitable rewards, be they monetary gifts or other favours and services. Such ‘representational’ work would also involve paying journalists and editors to write favourable articles about Blohm & Voss and negative ones about competitors. Reilly had particularly cosy relationships with the Novoe Vremia (New Times) and Vechernee Vremia.22 Perusal of these, and indeed other, newspapers during this period will bear testimony to the success of such tactics. Under Reilly would be a lower tier of ‘rear-rank’ or ‘background’ men, who would be employed by him on a retainer basis to do the low-level footwork.